The Signal and the Noise: Why So Many Predictions Fail-but Some Don't

The most calamitous failures of prediction usually have a lot in common. We focus on those signals that tell a story about the world as we would like it to be, not how it really is. We ignore the risks that are hardest to measure, even when they pose the greatest threats to our well-being. We make approximations and assumptions about the world that

1 A CATASTROPHIC FAILURE OF PREDICTION

The Worst Prediction of a Sorry Lot

Information is no longer a scarce commodity; we have more of it than we know what to do with. But relatively little of it is useful. We perceive it selectively, subjectively, and without much self-regard for the distortions that this causes. We think we want information when we really want knowledge.

However, the fact that the few theories we can test have produced quite poor results suggests that many of the ideas we haven’t tested are very wrong as well. We are undoubtedly living with many delusions that we do not even realize.

What should give us pause is that the few ideas we have tested aren’t doing so well, and many of our ideas have not or cannot be tested at all.

we can never make perfectly objective predictions. They will always be tainted by our subjective point of view.

The Prediction Solution

We need to stop, and admit it: we have a prediction problem. We love to predict things—and we aren’t very good at it.